The one-penny sequestration solution

Washington is in a swivet these days over across-the-board cuts March 1 that threaten to wreak havoc with domestic agencies and military readiness. But the reality is that if every American were to get one penny less on each dollar of government benefits and pay one penny more on each dollar of taxes, the budget improvement would be almost the same.

Indeed, based on new estimates this week, just a 1 percent increase in revenues and a 1 percent cut in spending would add up to more than $800 billion over 10 years — roughly the same as the almost $790 billion in appropriations cuts in the March sequester.

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Old budget hands hate such simplistic formulas. But does one across-the-board approach deserve another? And could the March sequester be replaced by such an alternative that would spread the pain more broadly and reduce the disruptions?

A 1 percent reduction is only one possibility. But it suits two political forces that seem to be merging.

The first is the mounting frustration among Republicans over the lack of progress on the debt — a frustration that feeds into the desire seen in the House for more streamlined solutions that can be explained to voters. The second is the message of President Barack Obama’s inaugural address, which celebrated collective action — “common effort and common purpose” — to meet the challenges facing the nation.

The politics and math serve two purposes: establish a spirit of shared sacrifice and reduce the deficit challenge to more workable proportions.

In this case, for example, it could be a 1 percent reset with no exceptions for Social Security or those earning less than $250,000. Abraham Lincoln is already the rage. Why not at least explore putting his penny to work to reach a larger deal?

“The danger is you are lighting every fuse,” said former Sen. Alan Simpson (R-Wyo.). “But it’s a citizens’ approach to getting them off their ass. What we have now is madness. And the citizens of America will have to solve this if the politicians won’t.”

“It’s a very interesting idea and candidly, not one I had thought of,” said Erskine Bowles, who helped to lead the presidential debt commission with Simpson in 2010. “As a businessman, I don’t typically like an across-the-board approach, but I like that this is spread out to cover entitlement spending as well.”

New numbers from the Congressional Budget Office report Tuesday provide some framework.

CBO shows deficits falling over the next few years but then stubbornly rising in the latter part of the decade as more baby boomers retire and interest payments balloon on the accumulated debt.

Caught most in the middle is the Pentagon. Between the March sequester and the continuing resolution, or CR, the Joint Chiefs of Staffare trapped in a situation that poses a real threat to military readiness. But CBO shows that by 2020, interest payments on the debt will have overtaken total defense spending, even with an allowance for future war-related costs.